FHA loans are a constant blog topic because it plays a huge role in the DC market. A lot of buyers can produce a 20% down payment in the DMV but for many it's a stretch. What to do? Use an FHA loan.
FHA has recently made two big changes and there's more coming. First, FHA will be upping the monthly mortgage insurance premium by .25% after April 18th, 2011.
Second, FHA enacted a rule which made buildings with rental policies ineligible for FHA approval. Translation: if your condo building has a rental policy that limits the length of a rental (no rentals for less than 6 months, for example), your building will not be eligible for FHA approval. If your building is already approved, you're golden. If your building was hoping to gain FHA approval this year, it wouldn't be possible if there is a rental restriction policy in effect.
THANKFULLY, Dave Stevens, the head of FHA, signed a one year waiver for the rule on Monday. Apparently, it's hard to rent condos in the rest of the country. FHA doesn't want a rental policy to restrict a possible rental. They would rather have a unit occupied than empty.
DC's rental market is strong so the rule has the opposite effect. It will hurt the market by making many buildings ineligible for FHA approval. Most condo buildings in DC have a rental policy in order to prevent a high investor ratio. It's a Catch-22: a building wants to keep the investor ratio low to be eligible for FHA but if there's a rental policy to enforce a low investor ratio, you're ineligible for FHA. Sheesh.
Moral of the story? If your building isn't already FHA approved, do it pronto.
*logo courtesy of HUD website